Rupee Depreciation and the Narrative of Strong Fundamentals: A Critical Re-examination of India’s Macroeconomic Position

Author(s): Dr. Manu J Vettickan and Dr. Anna Abraham Pachayil

Abstract:

Despite repeated official assertions that India enjoys strong macroeconomic fundamentals, the Indian rupee has continued its long-term depreciation against the US dollar, crossing the symbolic threshold of 90 INR per USD in late 2025. Sometimes this is referred to as a rupee paradox. This article examines the apparent contradiction between headline economic strength and persistent currency weakness. Using recent data, historical parallels and established theoretical frameworks, it demonstrates that exchange-rate movements in emerging markets are driven not only by domestic indicators but also by global financial cycles, structural current-account vulnerabilities, inflation differentials, and market perceptions of data credibility. An econometric analysis of rupee trends from 2010 to 2025 further reveals the dominant role of external factors, such as US interest rates and foreign portfolio investment flows, in explaining depreciation. The Indian experience reveals the limitations of the “strong fundamentals” narrative and highlights the enduring external fragilities that continue to weigh on the rupee.

keywords:
India, rupee, currency depreciation, macroeconomic fundamentals, current account deficit, global financial cycle, emerging markets, exchange rate dynamics.

Pages: 116-119     |    43 View     |    5 Download